11/15/1999 @ 12:00AM

China's 50 Richest Businessmen
as compiled by Rupert Hoogewerf

A joke in Beijing has China’s President Jiang Zemin and Premier Zhu Rongji driving together in a car. They arrive at a fork in the road. Jiang and Zhu signal left; their car veers to the right.

Ciao, Mao. The joke illustrates how far China has come since the late Deng Xiaoping began opening the economy in 1978 and famously declared that “to get rich is glorious.” Officially, Beijing oversees a blend of socialism and capitalism it calls a “socialist market economy with Chinese characteristics.” On the ground, however, entrepreneurs are gaining control of the economy. “The private sector is where the jobs are being created and the growth is coming from,” says China specialist Nicholas Lardy of Washington, D.C.-based Brookings Institution.

Who are these entrepreneurs? During his years in Shanghai with global accountants Arthur Andersen, chartered accountant and sinologist Rupert Hoogewerf began compiling a list of China’s leading business people. On the following pages, meet the 50 homegrown entrepreneurs that Hoogewerf (who returned to London in September) believes are China’s wealthiest. They’re a diverse bunch. They have made their money in agribusiness, real estate, soft drinks, trading, construction and the Internet. The poorest is estimated to be worth more than $6 million, in a country where the per capita income is still $700. Scaled to U.S. per capita income, $6 million in China would be worth something like $200 million. Yet few of these entrepreneurs are well known even in their own country.

China’s private sector (semi-private “township and village enterprises,” and private companies and farmers) now accounts for 60% of China’s GDP, up from zero in 1979, according to data from Deloitte &Touche. Party leaders emerged from a big meeting in August with promises to make that figure 75% by 2002. Today, 177 million of China’s working population (ages 18 to 60) work at a private, or partly private, company, versus 122 million in the state-owned industries (there are also 400 million or so peasant farmers).

To succeed in a major way it helps to have connections with party cadres and senior bureaucrats. But note that 41 of the 50 do not have such connections. Note, too, that Hoogewerf’s list focuses on active businessmen who run real businesses; it excludes the so-called princelings who’ve made money simply because they are relatives of China’s political and military leaders.

Estimates vary widely as to how many private companies exist in China. One official source puts the number at 1 million “registered” private businesses, on average capitalized at $72,000 and employing 14 people. Another official source lists 6 million “individually owned” businesses. But whatever the number, it’s certain to grow. Explains Jack Perkowski, the Beijing-based head of Asimco (Asian Strategic Investment Corp.), which has invested $400 million into 20 separate businesses in China: “China is at a crossroads. The state-owned enterprises have gotten to a point where they can’t perform anymore. Now China has to rely on private businesses for growth. The environment for entrepreneurs is getting better.”

The state sector is a huge weight around China’s neck. Out of 300,000 state-owned enterprises, at least half are losing money. Probably 40% or more of bank loans to SOEs are nonperforming, yet the state-owned firms continue to suck in capital. About 80% of the $1 trillion in outstanding loans made by China’s financial institutions have gone to SOEs. The amount lent to truly private companies was less than 0.6%, estimates Brookings’ Lardy. “If a private company defaults on a loan, a bank official will get into trouble,” explains Deloitte & Touche China expert Francis Bassolino. “He’s safer if the same thing happens at an SOE.”

Less than 20 companies out of the 992 listed on a stock exchange in China are private firms. Zhang Hongwei’s Orient Group, No. 7 on our list, was the first private company to list its shares on a Chinese exchange in 1994. Guangdong Kelon, China’s largest private white-goods maker (one of our “20 for 2000″ companies, Nov. 1) was the first private company to list in Hong Kong, with a share issue in 1996. It began life as a collective. Most of the other listed shares in China are companies with sizable government stakes. “To list you have to get approval from a state listing committee,” says Jia Yan, a China specialist with the Wall Street law firm Paul, Weiss. “When private companies ask, they are not treated the same as the SOEs.”

With so little access to capital, industries have splintered into hundreds of small businesses. Notes Asimco’s Perkowski: “The motorcycle market went from 2 million units to 10 million in sales from 1992 to 1997. Now you have 300 makers of motorcycles in China, and those are the legal ones.” Perkowski predicts that 25 or less will survive five years. But those that do will have a shot at becoming national brands and making their owners seriously rich.

Ironically, the survival of the Chinese communist party depends on a healthy entreprenerial class. Says Hope Group’s Liu Yongxing (No. 2 on the list): “Within the next ten years, private businesses, including foreign companies, may become the most important components in China’s economy.” As they do, the fortunes of the leading businessmen Hoogewerfhas identified will pile up. -Justin Doebele